Key Notes:
- The Department of Commerce Bureau of Economic Analysis is conducting a five-year benchmark survey of incorporated U.S. businesses of which a foreign person or entity owns or controls, directly or indirectly, 10% or more of the voting securities (or an equivalent interest if an unincorporated U.S. business) as of the business’s 2022 fiscal year end.
- Filing a response is mandatory under the International Investment and Trade in Services Survey Act unless the business does not meet the filing requirements. The act protects the confidentiality of the data that companies submit.
- A qualifying U.S. business must file a response by May 31, 2023.
The Department of Commerce Bureau of Economic Analysis (BEA) has announced that it has initiated its five-year benchmark survey of U.S. businesses whose voting shares are 10% or more owned, directly or indirectly, by a foreign person or company. U.S. businesses that have such foreign direct investment are required to respond no later than May 31, 2023.
The BEA is a federal statistical agency that collects information and reports on aspects of the U.S. economy including the gross domestic product (GDP) and trade balance. Federal and state governments, public and private sectors, and other interested parties use the statistics for budget planning, monetary and investment policy, and a better understanding of the U.S. economy’s performance. The BEA survey data gathered can only be used for statistical and analytical purposes and may not be provided to other federal agencies for tax, investigative, or regulatory purposes. The collected information is aggregated by BEA and reported on a macro-industry/economic level so that individual U.S. company data cannot be identified.
Five-Year Benchmark Survey
The BEA’s five-year benchmark survey is its most comprehensive survey on the financial and operating activities of U.S. businesses that are affiliated with foreign persons or multinational companies. The survey must be submitted using the applicable BEA Form BE-12 and is prepared based on the level of the U.S. business’s assets, sales, or income:
- Form BE-12A, the most complex survey form, is for U.S. businesses that at the end of fiscal year 2022 had (1) a majorityof voting interests (i.e., more than 50%) (“majority-owned”), directly or indirectly, owned by one or more foreign person(s), and (2) assets, sales, or net income (or loss) greater than $300 million.
- Form BE-12B is for U.S. businesses that are not subject to reporting on Form BE-12A and (1) are majority-owned, directly or indirectly, by one or more foreign person(s), and (2) had assets, sales, or net income (or loss) greater than $60 million but less than $300 million) for fiscal year 2022. Form BE-12B is also applicable to a minority-owned business (i.e., less than 50% but more than 10% of its voting interests owned by one or more foreign person(s) and assets, sales, or net income (or loss) greater than $60 million).
- Form BE-12C is for U.S. businesses that are not subject to reporting on Forms BE-12A or BE-12B and had assets, sales, or net income (or loss) less than $60 million.
A U.S. business must submit one of these forms only if its voting shares/interests are 10% or more owned, directly or indirectly, by a foreign person or company. If a U.S. business does not meet the foreign ownership requirements, no action is necessary. Only under certain special circumstances are companies that do have foreign direct investment not required to file a survey response.
Qualifying U.S. businesses must file responses with the BEA no later than May 31, 2023. Depending upon the level of complexity of foreign ownership and the business’s corporate structure, completing the survey form can be time-intensive. The BEA will generally approve reasonable requests for an extension of the filing deadline if requested before May 31.
While the amount and depth of detail required varies according to the applicable BE-12 form, the BEA is generally seeking broad operational and financial data on U.S. businesses, such as industry classification, sales, income, revenue, employees, property, equipment, and the volume of trade in goods. Given the focus on foreign direct investment, the survey also seeks information on any foreign parents and ultimate beneficial owners, their country of location, and the amount of their direct or indirect ownership via voting interests.
BEA Authority and Potential Penalties for Failure to Respond
This benchmark survey is conducted pursuant to the International Investment and Trade in Services Survey Act (P.L. 94- 472., 22 U.S.C. §§ 3101-3108, as amended), and the filing of a response is mandatory for qualifying businesses. Failure to file can subject a party to a civil penalty and to injunctive relief commanding such person to comply, or both. Willful failure to file a response subjects a party to fines and, if an individual, to imprisonment for not more than one year, or both. Any officer, director, employee, or agent of any business who knowingly participates in such violations, may, upon conviction, be punished by a similar fine, imprisonment or both.
This advisory bulletin may be reproduced, in whole or in part, with the prior permission of Thompson Hine LLP and acknowledgment of its source and copyright. This publication is intended to inform clients about legal matters of current interest. It is not intended as legal advice. Readers should not act upon the information contained in it without professional counsel.
This document may be considered attorney advertising in some jurisdictions.
© 2023 THOMPSON HINE LLP. ALL RIGHTS RESERVED.
